Problem 6-20

Note: Please review the PowerPoint Slides using the link below:

http://wps.prenhall.com/bp_render_qam_9/0,11119,2557279-,00.html

Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90, and the inventory carrying cost is estimated to be 10% of the cost of each valve. Barbara has made a study of the costs involved in placing an order for any of the valves that West Valve stocks, and she has concluded that the average ordering cost is $25 per order. Furthermore, it takes about 2 weeks for an order to arrive from the supplier, and during this time the demand per week for West valves is approximately 80.

a. What is the EOQ?

b. What is the ROP?

c. What is the average inventory? What is the annual holding cost?

d. How many orders per year would be placed? What is the annual ordering cost?

Problem 10-18

Note: Please review the PowerPoint Slides using the link below for the next two problems:

http://wps.prenhall.com/bp_render_qam_9/0,11119,2557508-,00.html

An air conditioning manufacturer produces room air conditioners at plants in Houston, Phoenix, and Memphis. These are sent to region distributors in Dallas, Atlanta, and Denver. The shipping costs vary, and the company would like to find the least-cost way to meet the demands at each of the distribution centers. Dallas needs to receive 800 air conditioners per month, Atlanta needs 600, and Denver needs 200. Houston has 850 air conditioners available each month, Phoenix has 650, and Memphis has 300. This shipping cost per unit from Houston to Dallas is $8, to Atlanta is $12, and to Denver is $10. The cost per unit from Phoenix to Dallas is $10, to Atlanta is $14, and to Denver is $9. The cost per unit from Memphis to Dallas is $11, to Atlanta is $8, and to Denver is $12.

a. How many units should be shipped from each plant to each region distribution center?

b. What is the total cost for this?

This solution provides step by step calculations for EOQ, ROP, average inventory, regional distribution and total cost.